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SR 01-08-2019 7G City Council Report City Council Meeting: January 8, 2019 Agenda Item: 7.G 1 of 6 To: Mayor and City Council From: David Martin, Director, Administration Subject: Introduction and first reading of an ordinance amending Section 4.36.040 of the Santa Monica Municipal Code to revise regulations pertaining to permanent relocation benefits and adoption of a resolution setting permanent and temporary relocation fees. Recommended Action Staff recommends that the City Council: 1. Introduce for first reading the attached Ordinance amending Santa Monica Municipal Code Section 4.36.040 revising regulations pertaining to permanent relocation benefits (Attachment A); and 2. Adopt a Resolution of the City of Santa Monica establishing Permanent and Temporary Relocation fees (Attachment B). Executive Summary For more than three decades, the voters and City government of Santa Monica have worked to ensure that the community continue to be an inclusive one for individuals and families of all incomes. As part of that comprehensive commitment, Santa Monica requires that property owners provide temporary relocation benefits to tenants displaced from their homes through no fault of their own. At its meeting on August 14, 2018, Council directed staff to increase relocation fees for renters evicted through no fault of their own to adequately cover costs associated with relocation. Staff subsequently undertook a study to examine whether the currently established benefits cover the actual costs of displaced tenants. Staff found that the costs associated with the impacts of permanent and certain temporary relocations have outpaced the established relocation fee benefits. When landlords remove permanent rental housing from the rental market, tenants are forced to permanently move from their homes and seek alternate housing in a constrained rental market. 38 households were permanently displaced from their homes due to landlords removing units from the market in 2017. Even with annual adjustments based on the Consumer Price Index, current permanent 2 of 6 and temporary relocation fees are inadequate to mitigate the adverse impacts resulting from these major life events and the erosion of long-term residents forced to look elsewhere for replacement housing. This report discusses both City staff’s and the Rent Control Board’s recommendations to increase the permanent relocation fees and staff’s recommendation to increase temporary relocation per diem rates for unanticipated relocations that result due to no fault of the tenant. Background On June 12, 2007, the City Council amended the Santa Monica Municipal Code allowing Council to establish by resolution reasonable per diem rates for temporary relocation expenses required under SMMC Section 4.36.100. On August 14, 2007, City Council adopted Resolution 10234 establishing the per diem rates for hotel accommodations, meal allowance, laundry allowance and pet accommodations. Discussion Permanent Relocation Fees Council last increased permanent relocation fees at its meeting on December 13, 2011 (Attachment C) at the levels recommended by Rent Control Board staff (Attachments D). Rent Control staff recommended higher relocation assistance to qualified tenants who were defined as households with seniors, persons with disabilities and minors. Apartment Size 2011 Base Relocation Amount 2011 Base Augmented Amount Single or studio $ 7,800 $ 8,900 One bedroom $12,050 $13,850 Two or more bedrooms $16,300 $18,750 The 2011 base permanent relocation fees have been adjusted for inflation by the percentage change in the rent of primary residence component of the Consumer Price Index CPI-W Index for the Los Angeles/Riverside/Orange County area published by the United States Department of Labor, Bureau of Labor Statistics annually since July 1, 2012. As of July 1, 2018, the permanent relocation fees have been adjusted to: 3 of 6 Apartment Size FY2018/19 Relocation Amount FY2018/19 Augmented Amount Single or studio $ 9,950 $11,450 One bedroom $15,300 $17,650 Two or more bedrooms $20,750 $23,850 The recommendations here utilize a new methodology intended to provide tenants with adequate mitigation for the adverse impacts resulting from permanent displacement at no fault of the tenant. The methodology used takes into account the following:  First and Last Months’ Rent based on Median Market Rent  Security Deposit Based on Median Market Rent  Estimated costs associated with disconnecting and reconnecting utilities  Estimated Packing and Moving Costs  Estimated Storage Costs of 3 Months  Packing Supplies  Taxes For households with disabled individuals or seniors 62 years and older (i.e. Qualified Households), staff proposes that instead of 3 months of storage that 6 months of storage be factored into the calculation to address the additional needs and time that is likely to be required for these households to find adequate housing in Santa Monica. Since Permanent Relocation Benefits are taxable, staff recommends factoring in a tax component, utilizing the tax rate of 22% for “Supplemental Wages” as defined in Section 7 of IRS Publication 15 and IRS Notice 1036, to ensure that tenants receive a benefit sufficient to cover the expenses they encounter when they are forced to relocate due to no fault of their own. 4 of 6 Based on this assessment, staff recommends increasing permanent relocation fees to the following amounts with no other changes: Apartment Size Proposed Relocation Amount Proposed Enhanced Amount for Qualified Households Single or studio $15,020.51 $15,712.82 One bedroom $20,705.13 $22,089.74 Two or more bedrooms $28,810.26 $30,682.05 Staff also recommends that these rates continue to be adjusted annually for inflation by the percentage change in the rent of primary residence component of the Consumer Price Index CPI-W Index for the Los Angeles/Riverside/Orange County area published by the United States Department of Labor, Bureau of Labor Statistics (“CPI”) commencing on July 1, 2019 and on July 1 of each year thereafter, as is the current practice. Temporary Relocation Fees When the initial per diem housing rate of $135 per day per household was established in 2007, staff researched “modest” level hotels in Santa Monica, including the Best Western, Comfort Inn, Days Inn and Travelodge. This rate has increased every year for the past 10 years by the Consumer Price Index and is currently $165 per day. Additionally, in 2017 there were 90 Code Enforcement cases resulting in 244 unplanned relocation temporary relocation orders issued for individual units. In some cases multiple units within one building were affected. Over the course of the past two years a number of tenants have indicated that it is difficult to secure lodging at local hotels at the current per diem rate. In response, staff competed a recent review of Santa Monica “modest” hotels including the Comfort Inn, Days Inn and Travelodge. 5 of 6 According to Santa Monica Travel & Tourism (SMTT)1, a private, non-profit corporation, the average daily rate for seven middle tier hotels including Best Western, Comfort Inn, Days Inn, and Travelodge, is $255. The average General Services Administration (GSA) Santa Monica lodging per diem rate for Fiscal Year 2018/19, which is used to reimburse overnight travel expenses for Federal employees, is $257.50. Following is the breakdown of the GSA lodging per diem rates by month for FY2018/19. Month Per Diem July 2018 $307 August 2018 $307 September 2018 $253 October 2018 $247 November 2018 $247 December 2018 $247 January 2019 $247 February 2019 $247 March 2019 $247 April 2019 $247 May 2019 $247 June 2019 $247 Average GSA Rate $257.50 Staff recommends that Council adopt the attached resolution (Attachment B), increasing the lodging per diem rates to equal the average of the SMTT ($255) and GSA ($257.50) rates and plus 14% to account for Transient Occupancy Tax, which comes to $292.13 per day. Staff does not propose to change any of the other temporary relocation per diem fees currently authorized by local law. These fees are proposed to stay the same as follows: Apartment Size Relocation Amount Meal allowance $31 per day per person 1 Santa Monica Travel and Tourism is a private, non-profit corporation formed in 1982 and is funded by the City of Santa Monica’s general fund and the Tourism Marketing District assessment. Under contract to the City of Santa Monica, the purpose of SMTT is to promote Santa Monica as a conference, business and leisure travel destination. As a sales and service organization, SMTT acts as the marketing representative for local businesses and the community as a whole. 6 of 6 Laundry allowance $1 per day per household if rental included laundry facilities Pet accommodations $30 per day per cat; $55 per day per dog; and actual daily boarding cost for all other pets. The pet accommodation per diem is required for lawful animals if the temporary relocation accommodation does not accept them. Staff also recommends that these rates continue to be adjusted annually for inflation by the percentage change in the Consumer Price Index CPI-W Index for the Los Angeles/Riverside/Orange County area published by the United States Department of Labor, Bureau of Labor Statistics (“CPI”) commencing on July 1, 2019 and on July 1 of each year thereafter, as is the current practice. Financial Impacts and Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action. These fees are not collected by the City, they are issued directly to tenants by the landlord. Prepared By: Salvador Valles, Assistant Director of PCD Approved Forwarded to Council Attachments: A. Ordinance - PCD - Tenant Relocation - 01082019 B. Resolution - PCD - Tenant Relocation - 01082019 C. Council Staff Report December 6, 2011 First Reading (Web Link) D. February 2011 Rent Control Memorandum to Council E. Written Comments 1 City Council Meeting: January 8, 2019 Santa Monica, California ORDINANCE NUMBER________ (CCS) (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF SANTA MONICA AMENDING SECTION 4.36.040 OF THE SANTA MONICA MUNICIPAL CODE TO UPDATE PERMANENT TENANT RELOCATION REGULATIONS WHEREAS, Government Code Section 7060.1(c) authorizes local governments to mitigate any adverse impact resulting from tenants being permanently displaced from their homes through no fault of their own; and WHEREAS, judicial decisions interpreting section 7060.1(c) consistently authorize monetary payments as a form of mitigation for displaced tenants; and WHEREAS, the City’s long established relocation benefits are vital to Santa Monica tenants, especially to those who must vacate their homes through no fault of their own, and such benefits are consistent with section 7060.1 and decisional precedents; and WHEREAS, relocation benefits must be sufficient in amount to reasonably mitigate the multitude of adverse impacts faced by tenants being permanently displaced from their homes through no fault of their own; and 2 WHEREAS, the Santa Monica Rent Control Board and City Staff has conducted an analysis of necessary relocation benefits to adequately mitigate involuntary displacement impacts in today’s rental market place; and WHEREAS, that analysis concludes that modest adjustments to the City’s permanent relocation benefits are necessary to adequately mitigate involuntary displacement impacts on tenants. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Santa Monica Municipal Code Section 4.36.040 is hereby amended to read as follows: 4.36.040 Amount of relocation fee—Permanent relocation. The amount of the permanent relocation fee payable pursuant to the provisions of this Chapter shall be established by City Council resolution. in accordance with the following formula: 2011 relocation fee adjusted for inflation by the percentage change in the rent of primary residence component of the CPI-W Index for the Los Angeles/Riverside/Orange County area, as published by the United States Department of Labor, Bureau of Labor Statistics, between November 2011 and the July 1st preceding the date of vacancy rounded to the nearest fifty dollars. This amount shall be updated annually commencing on July 1, 2012 and on July 1st of each year thereafter. (a) The 2011 permanent relocation fee established pursuant to Ordinance 2383 CCS and determined according to the size of the retail housing unit, was as follows: 3 Apartment Size 2011 Relocation Amount 2011 Augmented Amount Single or studio $ 7,800 $ 8,900 One bedroom 12,050 13,850 Two or more bedrooms 16,300 18,750 (ab) If a tenant is evicted from more than one rental housing unit on a property, the tenant shall not be entitled to receive separate permanent relocation fees for each rental housing unit. The tenant shall receive a single relocation fee based on the combined total number of bedrooms in the rental housing units from which the tenant is being evicted. If one of the rental housing units is a bachelor or single unit, it shall be counted as a one bedroom unit for purposes of determining the amount of the re location fee (e.g., a tenant who is evicted from a bachelor rental housing unit and a one bedroom rental housing unit would receive relocation benefits for a two bedroom unit). (c) If the rental housing unit from which the tenant is being evicted is furnished, two hundred fifty dollars shall be deducted from the amount set forth in subsection (a) of this Section. For purposes of this subsection, a rental housing unit shall be considered to be furnished if the landlord has provided substantial furnishings in each occupied room of the rental housing unit. (d) If one or more of the displaced tenants is a senior citizen or disabled person, or is a tenant with whom a minor child resides, an augmented amount shall be paid as set forth in subsection (a) of this Section. The amount added pursuant to this subsection shall be adjusted annually pursuant to the formula specified above commencing on July 1, 2012, and each July 1st thereafter. (be) Any tenant still in possession of a rental unit after the permanent relocation amounts have been updated pursuant to this Section, shall be entitled to the updated 4 relocation amounts even if the landlord commenced the termination of the tenancy prior to the update. In the event that a landlord has already complied with the provisions of Section 4.36.060 based on the relocation amounts previously in effect, but has not yet received a written request from a tenant for distribution of the fee pursuant to Secti on 4.36.070, the landlord shall place in escrow the additional amount of relocation fee required by this Section within five working days of the effective date of the updated amount. SECTION 2. Any provision of the Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. SECTION 3. If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any porti on of the ordinance would be subsequently declared invalid or unconstitutional. 5 SECTION 4. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. This Ordinance sh all become effective 30 days from its adoption. APPROVED AS TO FORM: _______________________ LANE DILG City Attorney 1 City Council Meeting: January 8, 2019 Santa Monica, California RESOLUTION NUMBER _________ (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA UPDATING PERMANENT AND TEMPORARY TENANT RELOCATION FEES WHEREAS, Government Code Section 7060.1(c) authorizes local governments to mitigate any adverse impact resulting from tenants being permanently displaced from their homes through no fault of their own; and WHEREAS, judicial decisions interpreting section 7060.1(c) consistently authorize monetary payments as a form of mitigation for displaced tenants; and WHEREAS, the City’s long established temporary and permanent relocation benefits are vital to Santa Monica tenants, especially to those who must vacate their homes through no fault of their own, and such benefits are consistent with section 7060.1 and decisional precedents; and WHEREAS, relocation benefits must be sufficient in amount to reasonably mitigate the multitude of adverse impacts faced by tenants being permanently or temporarily displaced from their homes through no fault of their own; and WHEREAS, enhanced relocation benefits are necessary to cover increased costs associated with relocations for senior citizens, disabled persons, or persons caring for minor children; and 2 WHEREAS, the Santa Monica Rent Control Board and City Staff has conducted an analysis of necessary relocation benefits to adequately mitigate involuntary displacement impacts in today’s rental market place; and WHEREAS, that analysis concludes that modest adjustments to the City’s permanent and temporary relocation benefits are necessary to adequately mitigate involuntary displacement impacts on tenants; and WHEREAS, the City Council is authorized to set permanent and temporary relocation benefit fees by resolution; and WHEREAS, on December 13, 2011, Council adopted Ordinance No. 2383 (CCS) establishing permanent relocation benefit fees; and WHEREAS, on August 14, 2007 Council adopted Resolution No. 10234 (CCS), modifying the temporary relocation benefit fees; and WHEREAS, these permanent and temporary relocation benefits are reasonably necessary and do not impose a prohibitive price on landlords’ right to exit the rental housing business. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. The following permanent relocation fees are hereby adopted: Apartment Size Relocation Amount Enhanced Relocation Amount Single or studio $15,020.51 $15,712.82 One bedroom $20,705.13 $22,089.74 Two or more bedrooms $28,810.26 $30,682.05 3 Relocation amounts shall be determined by the apartment size. However, i f one or more of the displaced tenants is a senior citizen or disabled person, or is a tenant with whom a minor child resides, an enhanced amount shall be paid instead, as set forth in the table above. If the rental housing unit from which the tenant is being evicted is furnished, two hundred fifty dollars shall be deducted from the applicable amount. For purposes of this Section, a rental housing unit shall be considered to be furnished if the landlord has provided substantial furnishings in each occupied room of the rental housing unit. SECTION 2. The following temporary relocation fees are hereby adopted: Apartment Size Relocation Amount Hotel or motel $256.25 per day per household lease Meal allowance $31 per day per person Laundry allowance $1 per day per household if rental included laundry facilities Pet accommodations $30 per day per cat; $55 per day per dog; and actual daily boarding cost for all other pets. The pet accommodation per diem is required for lawful animals if the temporary relocation accommodation does not accept them. SECTION 3. All permanent and temporary relocation fees shall be adjusted annually for inflation by the percentage change in the rent of primary residence component of the CPI-W Index for the Los Angeles/Riverside/Orange County area published by the United States Department of Labor, Bureau of Labor Statistics, commencing on July 1, 2019 and on July 1st of each year thereafter. SECTION 4. Resolution No. 10234 (CCS) and 2383 (CCS) are hereby repealed. 4 SECTION 5. If there are any conflicts between the fees and rates adopted in this Resolution and any prior adopted resolution or schedule, the fees and rates adopted through this Resolution shall take precedence. SECTION 6. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: _________________________ LANE DILG City Attorney 1 Vernice Hankins From:Nelson S. Lee <nelsonslee@gmail.com> Sent:Saturday, January 5, 2019 12:49 AM To:councilmtgitems Cc:janet@aagla.org Subject:Oppose relocation increases To Whom It May Concern, I oppose any increases to relocation fees. The current fees are already exorbitant. Nelson Lee 621 Strand St, Santa Monica, CA 90405 Item 7-G 01/08/19 1 of 6 Item 7-G 01/08/19 1 Vernice Hankins From:Adel E. Salawy MD <asalawy@verizon.net> Sent:Monday, January 7, 2019 4:05 PM To:councilmtgitems Subject:RE: Relocation Fees TO: The Honorable Members of the City Council of Santa Monica, CA January 7, 2019 Dear Sirs and Madams; I understand that on this coming Thursday, January 11, 2019, you are planning to increase the relocation fees by thousands of dollars - more than double what is on the records now. Why is that? Indeed, there can be no logical reasoning behind such a measure. Please stop harassing the housing providers of Santa Monica. It would be easier to quit this business altogether than to conduct this kind of business with your unfair attacks on the housing providers, i.e. landlords. You have made it a disgrace to the Mom-and-Pop housing providers of Santa Monica to even call themselves landlords anymore. What you are attempting to do to us is shameful and immoral. You are trying to illegally circumvent the Ellis Act. It will not work. Please do not approve these exorbitant.business-killing fees that have been proposed and which you will vote upon this coming Thursday. There are more important things to do in Santa Monica; for example, addressing the soaring crime rates against the citizens of our beautiful city. Please govern yourself accordingly Item 7-G 01/08/19 2 of 6 Item 7-G 01/08/19 2 Yours, truly, Adel Salawy A Mom-and-Pop Housing Provider Item 7-G 01/08/19 3 of 6 Item 7-G 01/08/19 1 Vernice Hankins From:Janet Gagnon <janet@aagla.org> Sent:Tuesday, January 8, 2019 10:41 AM To:councilmtgitems; Gleam Davis; Terry O’Day; Councilmember Kevin McKeown; Sue Himmelrich; Greg Morena; Ted Winterer Subject:Agenda Item 7G - Relocation Fees Dear City Council Members, The Apartment Association of Greater Los Angeles (AAGLA) represents more than 10,000 rental housing providers, including many in Santa Monica. The majority of our members are small mom and pop owners with 10 units or fewer(note: units and not buildings). Many of our members are retired seniors relying on their property for their retirement while providing affordable rental housing to few of their neighbors. No fault evictions occur due to rental housing providers going out of business or owners moving into a unit. As to going out of business this is not something any mom and pop owner wants to do. They rely on their building as a secure source for their retirement. However, if owners are unable to keep up with the costs of mortgage payments, repairs, maintenance, seismic retrofit requirements or other City mandates, then an owner may have no other choice but to remove the building from the rental market. Increasing operating costs are particularly problematic for mom and pop owners of small buildings under the Rent Stabilization Ordinance as they are unable to share these increases with tenants. As a result, owners may simply be unable to balance out costs versus rents resulting in them being forced to sell the building. Similarly, owners moving into a unit are doing so based on an urgent personal need for themselves or a close family member. Often time this happens with mom and pop owners when either a spouse or parent falls ill and needs more intense care in a smaller environment than a single family residence. In either of these instances these actions are being done by mom and pop owners due to an urgent personal need. Drastically increased relocation fees as currently recommended by City staff would be a major financial hurdle to mom and pop owners taking steps provided to them under state law to address their needs for their building. It is unclear why staff suddenly believes that the CPI is no longer an effective mechanism to use to determine relocation fees. CPI is a long-standing and well respected index that is used throughout California by local governments for rental housing. Santa Monica itself uses the CPI in order to determine rent increases for all rental housing under the Rent Stabilization Ordinance. If the CPI is suddenly so flawed as to not be appropriate for tenant relocation fees, then it is equally inappropriate for use to determine rent increases. It is deeply disturbing that staff is suggesting moving to a new methodology that involves so many guesses as part of its calculations to generate “estimates”. Fees for relocation are subject to wide fluctuations by individual provider, provider type, individual tenant needs/belongings, distance to new location and many other variables. To attempt to create a new baseline by such dynamic and intensely individualized differences is tremendously unwise and would inevitably create windfall profits for tenants, which is not the purpose of relocation fees. It is shocking that staff takes the further step to attempt to force owners to take on tax liabilities for tenants by making a false assumption about tax brackets. In Santa Monica there are tenants in many different tax brackets. By assuming any one tax bracket for all tenants will creat unjust windfall profits for tenants under that specific bracket. More significant, taxes themselves vary by each individual tenant based on a myriad of factors including income, dependents, charitable giving, write offs, etc. It is completely inappropriate for the City to attempt to foist individual tenants’ tax liabilities onto rental housing providers in these relocation fees. Item 7-G 01/08/19 4 of 6 Item 7-G 01/08/19 2 AAGLA has long agreed that CPI is not ideal for setting rent increases as it does not capture the true costs of providing rental housing, including repairs, maintenance, property taxes, property insurance, mortgage fees and new government fees (school bonds, new stormwater parcel tax, etc.). However, the City has long stated that it is too difficult and risky for the City to try and gauge the actual costs due to individualized variances. Logically, the same must be true for this newly proposed methodology for relocation fees. In addition, temporary relocation fees should be tied to individual rent rates being paid by tenants rather than being a blanket amount. While staff claims to attempt to remedy an existing need, it should not cause tenants to benefit from the relocation fees. Thus, amounts paid need to be tailored to individual rents being paid. If change is needed, then we recommend that the City require the daily relocation amount equal the daily rent payment amount. By so doing, the tenant and owner are kept in the same situation as if the relocation had not been necessary. Relocation fees should not be set at an amount that would penalize the rental housing provider for making needed repairs or renovations. We urge the City Council to completely reject the proposed new methodology and instead retain the current CPI to determine relocation assistance as the well established index appropriately used by city government for all things related to rental housing. We also encourage the City to set temporary rent increases at an equal amount to rent paid by the tenant prorated to a daily basis. Thank you for your consideration. Sincerely, Janet M. Gagnon, Esq.        Janet M. Gagnon, Esq. Director, Government Affairs & External Relations AAGLA 621 S. Westmoreland Ave. Los Angeles, CA 90005 t: 213/384-4131 ext 309 | f: 888/384-4131 www.AAGLA.org Twitter Facebook The Voice of Multifamily Housing Since 1917 ©       Item 7-G 01/08/19 5 of 6 Item 7-G 01/08/19 Item 7-G 01/08/19 6 of 6 Item 7-G 01/08/19 REFERENCE: Resolution No. 11158 (CCS)